Final answer:
Activity-based-costing analysis treats costs in relation to production activities and does not distinguish between short-run variable costs and short-run fixed costs.
Step-by-step explanation:
Understanding Activity-Based Costing
Activity-based-costing (ABC) analysis is a method of assigning overhead and indirect costs—such as salaries and utilities—to products and services. The question posed asks what distinction ABC analysis does not make. Specifically, ABC makes no distinction between short-run variable costs and short-run fixed costs.
This is because ABC focuses on the costs associated with activities and thereby examines the expenses as they relate to specific activities no matter their classification as fixed or variable.
Fixed costs are sunk costs, which do not change regardless of the production level in the short run, while variable costs are costs that vary with the level of output and often show diminishing marginal returns as production levels rise.
Activity-based costing treats all costs associated with production activities, distinguishing it from traditional costing methods that segregate costs into fixed and variable categories.